Real Estate

Vancouver housing bubble?

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[OP]
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i6s1 wrote:
Jul 2nd, 2012 4:35 am
I love it when people say there's no land in Vancouver. When 67 condos are under development. Uh.... where are these condos going to go if there's no more land? They've been saying that for years, and every year there's more developments.

Condos and suburbs take land pressure off the city proper. How can one think that condo prices and suburb prices will fall, without affecting land prices in the city? If a house in Van is 1m and the same house in Surrey is 500k, maybe it's a tossup for the average person. (And current growth trends show that Surrey is clearly winning that fight.) When that house in Langley is 250k, there's far fewer people who will take the place in Vancouver.
Not only that, but... of those 67 proposed towers, I believe there are going to be many 3 bedrooms created. Developers have decided to start making 3 bedroom condos more common, in order to allow families to live in them. And believe me... they will. We are seeing the traditional detached home buyers now go for condos instead of houses. It used to be when you had your first baby, you'd go out and find a starter home. Now people will rent a 1 bedroom condo with a crib in the master closet, and upgrade to a 3 bedroom condo when they have a couple more. Humans adapt. Or, like you said, they are moving to Langley where they can pick up a nice brand new 1400sqft 3 bedroom townhouse for around 300k, compared to a 450sqft bachelor suite in Vancouver which costs the same. So kids either grow up in a concrete jungle, or they grow up with a father who leaves the house every morning at 7am and gets home 12 hours later.
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rage2021 wrote:
Jul 2nd, 2012 1:48 pm
this is an awesome thread, can you also do Toronto? the fiance keeps pestering me on buying property and I'm saying no! hard statistics like this done lie.
i think Toronto is still on the upward trend though not sure when it will start its decline..
Maybe, but probably not - at least not right now. Vancouver is the "king of the mountain" when it comes to the Canadian bubble. It has grown the fastest and will drop the hardest. Therefore, it is the "most interesting" to track. Also, I live in Vancouver and so I am naturally interested in it. However, I don't mind posting periodic updates about Toronto in here. In fact, here's one now:

GTA (416+905) - Detached

643,838 - Jun 1-14 2012 (mid-month)*
646,565 - May 2012
650,147 - Apr 2012
631,509 - Mar 2012
636,080 - Feb 2012
586,098 - Jan 2012
574,351 - Dec 2011

*The real estate board has only reported mid-month stats for June so far

As you can see, Toronto is looking like it is headed to a 2 month red streak, and things are not likely to get better. April 2012 could very well be the "peak all-time high" for Toronto, with it all being downhill from there. Note the huge burst from Dec 2011 to Apr 2012, with prices going up 13% in 5 months. That is similiar to the kind of huge spikes we saw in Vancouver right before the crash (see the first post). This is also a TEXTBOOK bubble sign, where prices will sky rocket in the last few months right before a bubble crashes, and a frenzy begins.

So never fear... Toronto will soon join Vancouver in the crash party, it's inevitable. In fact, it may have already begun. So just tell your wife to settle down, buy her some jewelry to tie her over, and tell her everything will be okay.
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Dec 25, 2007
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haah thanks man! will do :P..these prices are ridiculous you would think literally everyone is making $200,000 a year.
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adamtheman wrote:
Jul 2nd, 2012 2:03 pm
The athlete's village is like a four letter word among Vancouver council. It's their biggest blunder yet. I am surprised Vancouverites re-elected the mayor after what happened. The Vancouver taxpayers are going to be paying for those condos for years to come.
They were quick to blame the previous administration say that they had no choice but to do it. Yes, that's probably true to a certain extent but the current administration have been making mistakes on how long to sell it for... They have been trying to make as much money as they can on the false assumption that the prices will only go up so they sold slowly rather than getting rid of the properties when the getting was good. Then spending multi-millions of dollars on bicycle lanes that very few people use and now trying to address the use issue by having a money loosing bicycle renting system for a city that requires bicycle helmets...
adamtheman wrote:
Jul 2nd, 2012 2:03 pm
That may be one reason alone to sell out of Vancouver... huge debt, reduced tax flow. The end result means property taxes in Vancouver will get jacked up. Cities are just like businesses... they have credit ratings, they can default on debt and they can go bankrupt. Stockton, CA just went bankrupt 5 days ago, maybe it the biggest city to ever go bankrupt with a population of almost 300,000. Once people start viewing the cities they live in as a business investment, places such as Surrey (with huge growth potential) will become even more attractive compared to places like Vancouver.

California city to become largest to file bankruptcy
Actually, Vancouver businesses are starting to complain about the tax burden. A few days ago the news featured one restaurant in the West end that decided to close down due to high tax rates in the past few years in Vancouver. The owner said that he could have sold his business a few years a go for twice the going price simply because the tax rates were lower and therefore the business was more profitable.
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I was researching the pricing trends in Vancouver on the internet and came across an interesting website that shows price drops of selected properties. You may be interested to view to get a sense of some real situations:

http://vancouverpricedrop.wordpress.com/

I realize this listing is a very select list of properties but it does give one a sense of price movements with respect to time.
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choclover wrote:
Jul 3rd, 2012 10:55 am
I was researching the pricing trends in Vancouver on the internet and came across an interesting website that shows price drops of selected properties. You may be interested to view to get a sense of some real situations:

http://vancouverpricedrop.wordpress.com/

I realize this listing is a very select list of properties but it does give one a sense of price movements with respect to time.
Cool site
Hello
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craftsman wrote:
Jul 2nd, 2012 4:51 pm
They were quick to blame the previous administration say that they had no choice but to do it. Yes, that's probably true to a certain extent but the current administration have been making mistakes on how long to sell it for... They have been trying to make as much money as they can on the false assumption that the prices will only go up so they sold slowly rather than getting rid of the properties when the getting was good. Then spending multi-millions of dollars on bicycle lanes that very few people use and now trying to address the use issue by having a money loosing bicycle renting system for a city that requires bicycle helmets...


Actually, Vancouver businesses are starting to complain about the tax burden. A few days ago the news featured one restaurant in the West end that decided to close down due to high tax rates in the past few years in Vancouver. The owner said that he could have sold his business a few years a go for twice the going price simply because the tax rates were lower and therefore the business was more profitable.
The previous administration really did everything they needed to do given the economic circumstances at that time. But the new city council and mayor really blew it and are still blowing it now. Last I checked there were still hundreds of condos for sale... the city should have had the wisdom and foresight to sell these condos off. With TD predicting a 15% drop over 2-3 years (which is very conservative), what is Vancouver's excuse for holding onto these condos? They are listening a guy like Bob Rennie, who some may refer to as a shyster, that's why. The city will end up turning the leftovers into rental housing and we'll end up with that ghetto low rise village across the water we were promised. As for businesses, there was an article the other day that talked about how much commercial real estate is empty and businesses are folding. Heck, even Robson street is being hit

http://www.theglobeandmail.com/news/bri ... le4382693/
Vancouver’s most famous street has been hit by a wave of vacancies. An unusually high number of retailers – including HMV, Starbucks, Tommy Hilfiger, Guess, Esprit and Payless Shoes – have closed shop, and several storefronts sit empty. The Levi’s store remains open, but has a large “for lease” sign at its window. Industry observers blame the exodus on some of the highest retail rents in the country, plus a tough economic climate
It just makes it worse for Vancouver. I predict a very high tax shortfall for Vancouver in the coming years. It will be a quadruple whammy:

1) Reduced population (less spending)
2) Reduced business (less business taxes)
3) Reduced property prices (less property tax)
4) Huge debts from the olympics (high debt load)

This quad combination could result in the unthinkable... a bankrupt Vancouver. People would laugh at the thought of that, but it could very well happen. Vancouver has been living off of high taxes for a long time, with very high property taxes making the city run. People don't mind paying those high property taxes because their homes keep going up in value. But when home prices crash, and assessment prices drop, the city will be facing a huge shortfall. And it doesn't appear the Mayor has any clue at all about what is going to hit him... he is off busy spending tax payer money trying to find "affordable housing solutions"... uh... just a guess Mr. Mayor, but... you won't have to worry about that for long.
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adamtheman wrote:
Jul 3rd, 2012 2:35 pm
But when home prices crash, and assessment prices drop, the city will be facing a huge shortfall. And it doesn't appear the Mayor has any clue at all about what is going to hit him... he is off busy spending tax payer money trying to find "affordable housing solutions"... uh... just a guess Mr. Mayor, but... you won't have to worry about that for long.
Assessment prices don't have anything to do with the actual tax assessed against a property. They just serve as a calculation of the pro rata share that an individual property holder pays for their property versus the properties of others.

However, your other points are well taken -- if the tax burden rises significantly in Vancouver, this would result in less disposible/discretionary income, which further makes speculation in real estate more difficult. Personal income tax rates are also (generally) at generational lows, with deficit financing being used to make up the balance. Absent a massive industrial revival in Canada, an economy based solely on real estate speculation is quite implausible.
TodayHello wrote:
Oct 16th, 2012 9:06 pm
...The Banks are smarter than you - they have floors full of people whose job it is to read Mark77 posts...
[OP]
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choclover wrote:
Jul 3rd, 2012 10:55 am
I was researching the pricing trends in Vancouver on the internet and came across an interesting website that shows price drops of selected properties. You may be interested to view to get a sense of some real situations:

http://vancouverpricedrop.wordpress.com/

I realize this listing is a very select list of properties but it does give one a sense of price movements with respect to time.
I've seen this one before - it's a neat little website. Thanks for posting it. The guy who does it spends a lot of time gathering the data.
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Mark77 wrote:
Jul 3rd, 2012 2:42 pm
Assessment prices don't have anything to do with the actual tax assessed against a property. They just serve as a calculation of the pro rata share that an individual property holder pays for their property versus the properties of others.

However, your other points are well taken -- if the tax burden rises significantly in Vancouver, this would result in less disposible/discretionary income, which further makes speculation in real estate more difficult. Personal income tax rates are also (generally) at generational lows, with deficit financing being used to make up the balance. Absent a massive industrial revival in Canada, an economy based solely on real estate speculation is quite implausible.

Hi Mark. Assessment prices have an affect on how property taxes are viewed by every property owner. As an example, if homeowners are now paying $10,000 a year on a $1,000,000 assessed property, then their taxes are essentially 1%. However, if assessed values drop by 50% to $500,000, but property taxes remain the same, then homeowners are now paying 2% on their property taxes. If taxes do not drop along with assessment prices, then "houston we have a problem". That's why we saw some homes selling for $1 during the detroit fiasco - because the houses had more property taxes owing on them than the actual houses were worth. It's like YLO (the owner of this website). They refused to drop their dividends and it caused them go to bankrupt (or nearly, at this point). Vancouver needs to lower taxes if house prices drop, period, and are they prepared to do it? I don't know. A frugal city would have been saving up money during prosporous times. If we had an idea city council, they would have said "Property tax revenue has doubled over the past 10 years. Since we don't expect this to last forever, we are going to put some money away in a rainy day savings account for when our property tax revenue drops back down". But instead? They said "Let's throw a huge party!!! Olympics, here we come". This may not end well...

Edit: From the Vancouver site:
The value of property for tax purposes is determined by BC Assessment, which is established under provincial legislation and is independent of the municipality. Municipalities are not involved in determining assessed values.
Does it work differently in the GTA?
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Mark77 wrote:
Jul 3rd, 2012 2:42 pm
However, your other points are well taken -- if the tax burden rises significantly in Vancouver, this would result in less disposible/discretionary income, which further makes speculation in real estate more difficult. Personal income tax rates are also (generally) at generational lows, with deficit financing being used to make up the balance. Absent a massive industrial revival in Canada, an economy based solely on real estate speculation is quite implausible.
Ah good point.... something else I forgot... income tax rates. The liberals are done in BC and will be replaced by the NDP next year. It's no secret to anyone, the NDP is going to jack up income tax rates big time, which means less take home pay for everyone. How will this one single thing alone affect real estate prices? One more thing to throw into the pot! When such a huge percentage of the population owns property, an income tax increase is almost the same as the bank of canada upping rates. Less take home pay + mortgage rates rising + decrease in home value. Wages are not going up to support this, so where will all the money come from?
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adamtheman wrote:
Jul 3rd, 2012 2:51 pm
Hi Mark. Assessment prices have an affect on how property taxes are viewed by every property owner. As an example, if homeowners are now paying $10,000 a year on a $1,000,000 assessed property, then their taxes are essentially 1%. However, if assessed values drop by 50% to $500,000, but property taxes remain the same, then homeowners are now paying 2% on their property taxes.
Sure. That's how it works.

. If we had an idea city council, they would have said "Property tax revenue has doubled over the past 10 years. Since we don't expect this to last forever, we are going to put some money away in a rainy day savings account for when our property tax revenue drops back down". But instead? They said "Let's throw a huge party!!! Olympics, here we come". This may not end well...
I'm not sure if property tax revenue doubled over the past 10 years -- but the rate of increase in property tax collected from the tax base has nothing to do with the values, but rather, on the city's revenue requirement.

Of course its easier to collect property taxes from folks who just view paying property tax as a minor carrying cost on the way to enormous RE riches ("just throw it on the HELOC!!!"), than it is to collect property tax from individuals who can barely pay their mortgages as we'd see in a RE downturn and funding cost spiral.
TodayHello wrote:
Oct 16th, 2012 9:06 pm
...The Banks are smarter than you - they have floors full of people whose job it is to read Mark77 posts...
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adamtheman wrote:
Jul 3rd, 2012 2:51 pm
Edit: From the Vancouver site:
Does it work differently in the GTA?
AFAIK, same system of property taxes across the country. The taxing authority sets a revenue requirement. A provincial assessment agency, a quasi judicial tribunal, uses a formula to determine the relative valuations of properties, to 'spread' the tax burden (ie: revenue requirement) over the entire tax base.

If everyone's property drops by 50%, but the revenue requirement doesn't change -- then the tax payable by individuals doesn't change either. This is quite unlike the system used in many parts of the USA where the revenue of the taxing authority's revenue is directly tied to that of the value of the property. I believe the correct technical term for those USA-style (not Canadian) systems is a so-called ad valorem tax (but I could be wrong....).
TodayHello wrote:
Oct 16th, 2012 9:06 pm
...The Banks are smarter than you - they have floors full of people whose job it is to read Mark77 posts...
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Mark77 wrote:
Jul 3rd, 2012 3:00 pm
I'm not sure if property tax revenue doubled over the past 10 years -- but the rate of increase in property tax collected from the tax base has nothing to do with the values, but rather, on the city's revenue requirement.

Of course its easier to collect property taxes from folks who just view paying property tax as a minor carrying cost on the way to enormous RE riches ("just throw it on the HELOC!!!"), than it is to collect property tax from individuals who can barely pay their mortgages as we'd see in a RE downturn and funding cost spiral.
Ah... yes... I see what you are saying. Yes, property taxes are not determined by the actual assessment. Municipalities are able to charge whatever they want, it's a simple adjustment of percentages. But cities are compared to one another. If Vancouver's property taxes are 2x as high as Burnaby, then property prices are devalued equivalent to the difference between property taxes. Herein lies the problem... as you say, the property tax collected has to do with the "city's revenue requirement". And the question is, during this housing boom, did the "city's revenue requirement" go way up? Will the olympics and the athletes village mean that Vancouver has a bigger shortfall than other cities? Not sure... but either way, the whole bundle doesn't look pleasant.
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adamtheman wrote:
Jul 3rd, 2012 2:51 pm
Does it work differently in the GTA?
Assessments for tax purposes in the GTA are done by MPAC, which is an Ontario-wide system.

Basically they do assessments on your place every 4-5 years or so, and at this time they try to predict year over year pricing using very minimal growth rates until your next assessment. The municipality (so Toronto here) sets the property tax rate you need to pay (there are 2 aspects, city rate + education rate) that is calculated using this MPAC number.

Right now our residential rate is 0.77%. So if your home is assessed by MPAC at $500K, you owe $3,850 in property tax. In the GTA, property taxes have been decreasing as a % from around 1.1% a decade ago.

Typically the assessed values are considerably below the actual market value you would get if you sold the house, so most people don't question the values. However if you feel the MPAC value is considerably higher than the actual market value meaning you are paying more taxes than your place is worth... then you can submit a request for a re-assessment within the first few months of a given tax year. If your MPAC assessment is lowered, your taxes would also immediately be lowered. This is what could happen in a crash, depending on how long ago a place was assessed.

In my case, the current value on my MPAC assessment is around 20-25% lower than the actual market value today. So i woudnt even bother to request a re-assessment unless property value dropped by this amount.

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